This paper describes the technology and microstructure of Al2O3-Fe functionally graded composites, FGM, obtained by slip-casting under magnetic field. Alumina alpha-Al2O3, provided by Alcoa (symbol A16SG), with average grain size of 0.5 mu m, and iron powder, (symbol Distaloy AB) from Hoganas, with average grain size of 35 mu m, were used to produce a series of specimens which differed in contents of Fe particles in Al2O3. As a source of magnetic force a permanent magnet was used. Preforms were sintered in a vacuum at temp. 1470 degrees C. The microstructures of the specimens were quantitatively described via stereological methods. Sections, parallel to the magnetic field lines were analyzed using special image analysis software. Stereological methods presented in this work have been used to determine gradient in the volume fraction of the Fe particles and variation in their size and dispersion. These parameters are essential for controlling the technological process of interest and to design microstructure for needed properties (fracture toughness).